Engines of growth and inequality in the wealth of nations

Abstract

The Royal Swedish Academy of Sciences awarded the 2025 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel to Philippe Aghion, Peter Howitt, and Joel Mokyr “for having explained innovation‐driven economic growth”. This paper examines their contributions in the context of the development process as a whole. Aghion and Howitt established the centrality of creative destruction in the growth process of advanced economies, identifying the displacement of existing technologies by superseding ones as a key mechanism in sustaining economic growth. Mokyr highlighted the role of a tightening link between theoretical knowledge and practical application during the Scientific Revolution and the Enlightenment in fostering technological progress in Western Europe on the eve of the Industrial Revolution. These frontier‐centered perspectives transformed our understanding of the causes and consequences of innovation‐driven growth in advanced economies operating near the technological frontier. Yet, throughout much of the development process, the central challenge to growth has depended less on the creation of new technologies than on the emergence of fundamental conditions conducive to skill formation, fertility decline, and societal adaptation, which have shaped the timing of the transition to modern growth, the pace of economic growth thereafter, and the contemporary inequality in the wealth of nations. A comprehensive account of sustained growth and contemporary inequality across societies requires anchoring the growth process in its broader historical arc.